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Market Report

Thursday September 6th, 2018

December closed up 1 at $3.66 ¼ and March 19 closed up 1 at $3.78 ¼.  November beans closed up 1 ¼ at $8.39 ¼ and January 19 closed up 1 ½ at $8.52 ¼. December wheat closed down 8 at $5.13 ¾ and July 19 closed down 6 at $5.47 ¼. Crude oil closed down $.90 at $67.52.

A very quiet trade day on Thursday with less than 200,000 corn futures traded hands, even when including spreads. Action was fittingly choppy, moving up and down at will in a $.04 range, ultimately finishing higher. Managed Money traders were viewed net buyers of about 5,000 corn today, and will head into tonight net short about 60,000 combined corn futures and options. Price action appears to have stalled some as the trade awaits fresh production input from the USDA next week. More immediately, the public comment period on $200 billion in threatened China tariffs ends tonight. Theoretically, the U.S. could now “push all in” on its “Trade Wars” gambit. We would expect such a play to occur in the near future(though not necessarily tonight), particularly given China can no longer retaliate “tit for tat”, as China imported less than $200 billion in U.S. goods last year.

The weekly EIA report was neutral for ethanol, as expected, though the results played out differently. Production unexpectedly jumped +1.6% to a 1.087 mil bbl/day rate. Strong export flows during the reported week “absorbed” the extra supply, and ethanol inventories declined slightly. The report did no favors for the market, and the weak ethanol crush implies continued small losses for most Midwest producers. Elsewhere, China still busy battling periodic “African Swine Fever” outbreaks. Surprising the amount of demand for corn at this week’s auction, as authorities cleared 2.9 mmt from stocks, or 75% of offerings. In recent months, they had been lucky to clear 25%. NAFTA negotiations are on-going in an attempt to include Canada. The next several days are still expected to bring considerable precip to the Eastern Belt. Still some concern recent excessive rains in some areas of the Midwest may have taken a few decimals off yield potential.

Beans closed modestly higher although the market is just marking time ahead of next week’s report. The stabilizing price action is an accomplishment considering the supply side chatter around the trade including an Informa yield estimate of 52.9 bpa today.  Using a 52.9 bpa yield, it would grow the carryout to 900 million bushels which is more than double the 430 mb 17/18 carryout.  The feature today was the oil share correction with meal gaining sharply on oil. Meal was able to shrug off the growing spread of African swine fever in the headlines to close above Monday’s high which if confirmed tomorrow, is a positive technical trade.  It is hard to trust meal with the swine fever being somewhat of a wildcard on feed demand but the charts are giving positive signals.

A frost/freeze dipped down into N MN overnight. The impact on corn and soybean growing areas was not expected to be very significant. Additional 1 to 2 inch rains fell across portions of IA and N MO where they are already dealing with too much from the last round. The pattern shifts the rains further to the south and east which will spare these areas that have already seen big accumulations from the next round although parts of C IL, IN and OH could see some 6 inch + totals through the weekend. Next week most of the corn belt will be in a warm dry pattern allowing fields to dry back down and early corn harvest activity to resume with rains only lingering in the N Plains/MN.

The wheat complex continues to find no follow through on overnight rally attempts, and after trading slightly better during the early part of the evening, price action reversed and finished the night down around the session’s lows. The European wheat contract also reversed after a slightly better start, which did not improve the chances of the wheat complex rallying back today. Neither did the overnight news as the Russian Ag Ministry once again said they had no plans to impose a wheat export tax. Stats Can stocks data came in within the range of expectations and was uninfluential to price action.

The next USDA crop report is Wednesday. It is a given that the USDA is going to have another round of EU production reductions in that report. The biggest question we thought the USDA was going to have to answer in the report was what it was going to do about their export expectations? They currently have Russian exports for this coming year pegged at 35 MMT. Over the past several weeks there have been much speculation on whether Russia will cap their wheat exports at 25 MMT. At least for now, that does not look to be the case. Just today their Ag Ministry reiterated that the ministry has no plans to curb imports or impose a wheat export tax. Meaning, in next week’s report the USDA does not need to adjust their export expectations much.

Sure, they will probably reduce Russian exports a couple million, but it will probably not be significant enough to be a market mover. EU exports will probably be slashed a little, but not enough to cause a stir. They may tweak Aussie production some, but a 2 MMT reduction would be enough for now. They may adjust Canada a little, but it will not raise any red flags. So, over the past few weeks, the prognosis of this report has gone from most likely very friendly, to a report that will probably offer little for the bull to sink its teeth into.

Anna Kaverman

anna@mercerlandmark.com

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